Exam 10: Classical and Keynesian Macro Analyses

Oil prices increased significantly in 2008. According to the Keynesian model, this increase in oil prices should have caused which of the following to occur?

The short-run aggregate supply curve is horizontal when

In the classical model, an increase in aggregate demand will lead to an increase in wage rates while a decrease in aggregate demand will

Involuntary unemployment

Suppose the U.S. dollar gains strength against the euro (and against other major currencies). This strengthening of the dollar will cause which of the following to occur?

The Keynesian short-run aggregate supply curve in the simplified Keynesian model is unrealistic because

Saving is not a problem in the classical model because

Keynes argued that because of sticky prices and wages

Which of the following is an example of money illusion?

Say's law argues that I. overproduction is typical in a market economy. II. supply creates its own demand.

Long-run aggregate supply curve in the classical model

According to Keynesian economics, if there are unutilized resources in the economy and aggregate demand increases

The discovery of new oil deposits will cause

The long-run aggregate supply curve is vertical at $10 trillion, but the short-run aggregate supply curve intersects the aggregate demand curve at $12 trillion. From this, we know that

Which one of the following statements is TRUE?

Which of the following is NOT a key assumption of the classical model?

According to Keynes, once a system attains an economy-wide equilibrium

If the economy is near full capacity, the effect of a negative aggregate demand shock is to

According to the classical model, investment

Economic growth will NOT result in deflation if aggregate demand shifts